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For Immediate Release:  
For Further Information Contact:
January 10, 2005

Office of The Attorney General
- Peter C. Harvey, Attorney General

 

Lee Moore
609-292-4791

 
 
Attorney General Announces Settlement With State Farm on Titling of ‘Salvage’ Autos  

TRENTON – Attorney General Peter C. Harvey announced today that New Jersey has entered into a multi-state settlement agreement with the State Farm Mutual Automobile Insurance Company whereby State Farm will pay eligible consumers a total of $40 million to compensate for losses tied to the company’s not having properly titled wrecked or “total loss” vehicles it acquired from policyholders and later resold.

According to Harvey, the agreement concerns vehicles and vehicle titles that State Farm acquired from policyholders in the wake of road accidents, theft or other incidents that ultimately led to the autos being written off and passed on to salvage yards, licensed vehicle dismantlers, dealers or others.

New Jersey and 48 other states require by law that vehicles be titled as “salvage,” “junk,” or the equivalent when they meet certain standards related to theft, accident, flood damage, general deterioration, etc. Harvey explained that State Farm came forward in late 2003 and acknowledged that, while it had documentation of having properly titled an estimated 2.4 million vehicles in recent years, there were thousands more autos for which it had insufficient or no documentation that a proper title had been obtained.

He noted that an estimated 30,000-to-40,000 vehicle owners across the United States may have unwittingly purchased a car ,truck or Sport Utility Vehicle (SUV) that was improperly titled by State Farm after being acquired from policyholders. In each case, he said, the vehicle at issue would have been written off as a total loss for insurance purposes and should have been given a “branded” title indicating it was a “salvage” or “junk” vehicle, but was not, and later turned up in the hands of a consumer. In the past year, State Farm has changed its vehicle titling practices and, under terms of the multi-state agreement, will employ a national research firm to identify the current owners of vehicles that have not been properly titled as salvage vehicles. Through a third-party administrator hired by State Farm, vehicle owners will be contacted and provided a compensation claim form.

“Our office’s objective is to ensure that auto consumers get what they pay for with their hard earned dollars. We must also protect consumers’ safety by making sure that unsafe vehicles are not put on the street,” said Attorney General Harvey.

“There are obviously thousands of people out there who believe they have acquired a used car, truck or SUV with a relatively routine history when, in fact, they have acquired a vehicle that was once written off as a total loss due to damage or other circumstances. These consumers need to be given the opportunity to make an informed choice about using that vehicle, and they need to be compensated,” the Attorney General added.

Harvey said that consumers who complete a claim form and are approved will receive a compensation payment from State Farm later this year or early in 2006.

Under the agreement, State Farm will work in the coming months with the New Jersey Motor Vehicle Commission and motor vehicle agencies in 49 other states, as well as the District of Columbia, to determine in each state the specific vehicles which require a salvage or “branded” title. Based on preliminary estimates, it is believed that more than 3,000 New Jersey residents own vehicles currently registered in New Jersey which were not titled as salvage by State Farm, but should have been.

All eligible vehicle owners will receive a letter from the Attorney General in their home states with a claim form to complete and return to an independent Claims Administrator firm – the Minnesota-based Rust Consulting, Inc. – which has already been approved by the states. Rust Consulting will administer the State Farm consumer notification and compensation program. After all claims are in, the amount each vehicle owner will receive will be finalized and checks mailed.

Harvey explained that the final amounts received by individual consumers will depend on the current value of their vehicles and how many consumers elect to participate in the payment program. Payments will be made to the owners of currently-registered vehicles and will be based on the current average retail value of the vehicle. For example, owners of vehicles worth between $1,000 and $2,000 could receive $600; owners of vehicles worth between $5,000 and $6000 could receive $1,400; owners of vehicles worth between $10,000 and $11,000 could receive $3000.

It is expected that current owners of eligible vehicles will be contacted by Fall 2005, after the identification process is completed. State Farm also is making a payment of a total of $1 million to all the state participants for consumer education, future consumer litigation, public protection, local consumer aid funds, and attorney fees and costs.

State Farm Vice-President and Counsel Jeffrey W. Jackson said State Farm has made a “commitment to resolve salvage titling concerns in a proactive manner.” Jackson added that the settlement agreement “demonstrates that State Farm is serious about meeting our responsibilities under the various state ‘branded’ title laws, and “is the right thing to do for our policyholders and the public.”

Attorney General Harvey said he respects State Farm’s decision to come forward , and to work cooperatively with the states.

“We hope this agreement will encourage other companies to step forward when necessary, take responsibility, improve practices, and make things right for consumers,” Harvey said.

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